Analysis of the sparkling water market
The relevance of research
The subject of this study is the market of carbonated mineral and drinking water. The category ""Carbonated Water"" does not include carbonated drinks, i.e. products prepared with the use of food additives, including juices, infusions, essences, flavorings, dyes, sugar, sugar substitutes, sweeteners, preservatives.
The carbonated water market in this study is understood as a set of enterprises that form the supply of the market, the number of consumers that form the demand of the market, as well as the relationship that arises between sellers and consumers.
Purpose of the study
Analysis of the state of the carbonated water market, assessment of the market size, analysis of competitors, as well as identification of factors affecting the carbonated water market
Content
Part 1. Overview of the Indian Soda Market
1.1. Main characteristics of the market
1.2. Dynamics of the carbonated water market volume in 2015-2019 Potential market capacity
1.3. Assessment of factors affecting the market
1.4. Life cycle stage of the carbonated water market
1.5. Competition from substitute products
Part 2. Competitive analysis in the sparkling water market
2.1. Major players in the market
2.2. Market shares of the largest competitors
2.3. Profiles of major players
Part 3. Analysis of carbonated water production
3.1. Volume and dynamics of domestic production of carbonated water
3.2. Share of exports in the production of sparkling water
3.3. Segmentation of carbonated water production by regions
3.3.1. Production by Union Territories of India
3.3.2. Production by states of India
Part 4. Analysis of foreign trade supplies of sparkling water
4.1. Volume and dynamics of sparkling water imports
4.2. Structure of imports by countries
4.3. Volume and dynamics of carbonated water exports
4.4. Structure of exports by countries
Part 5. Analysis of carbonated water consumption
5.1. Dynamics of consumption of carbonated water
5.2. Analysis of the results of tenders for the purchase
Part 6. Price Analysis
6.1. Average Producer Prices by Union Territories of India
6.2. Average consumer prices by states in India
Part 7. Assessment of factors of investment attractiveness of the market
Part 8. Forecast for the development of the sparkling water market until 2024
Part 9. Recommendations and conclusions
Research excerpt
Part 1. Overview of the Indian Soda Market
1.1. Main characteristics of the market
The subject of this study is the market of carbonated mineral and drinking water. The category ""Carbonated Water"" does not include carbonated drinks, i.e. products prepared with the use of food additives, including juices, infusions, essences, flavorings, dyes, sugar, sugar substitutes, sweeteners, preservatives.
The carbonated water market in this study is understood as a set of enterprises that form the supply of the market, the number of consumers that form the demand of the market, as well as the relationship that arises between sellers and consumers.
The definition of drinking water described in this study is given in GOST 32220-2013 “Drinking water packaged in containers. General technical conditions"". This standard applies to drinking water packaged in containers and intended for drinking purposes, as well as for the preparation of food products, including baby food, drinks, food ice, and establishes general requirements for its production, supply, sale and use.
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However, it should be noted that the share of imported products is gradually growing: if in 2015 the share of foreign carbonated mineral and drinking water accounted for …%, then by 2019 this share increased to …%.
1.2. Dynamics of the carbonated water market volume in 2015-2019 Potential market capacity
Market size in physical terms = production + imports - exports.
In 2019, carbonated mineral and drinking water was supplied to Indian consumers in the amount of … thousand tons. In 2015-2019 the average annual growth rate (CAGR) of carbonated water supplies in physical terms amounted to …%. Import deliveries developed dynamically: the average annual growth rate (CAGR) of import deliveries in physical terms in 2015-2019 exceeded …%. CAGR of Indian production in the specified period of time is …%.
The market has shown growth every year, despite the economic difficulties.
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The development potential of the carbonated mineral and drinking water market is determined by several factors:
• India has a relatively low level of per capita consumption of carbonated water - more than ... liters per person, for comparison, in Europe this figure is ... liters. In other words, the Indian market has a huge growth potential (up to … thousand tons annually),
• according to the Rospotrebnadzor of India, the share of water samples that do not meet sanitary and epidemiological standards for 9 months of 2019 amounted to …%. When there is no quality drinking water in the central water supply, sales of bottled water, including sparkling water, increase.
• In India, siphons for carbonating water are not very popular. People prefer to buy a ready-made carbonated product,
• it is important to popularize the benefits of carbonated water for the body. For example, in the morning when drinking only 250 ml of carbonated water, 900 ml of gas is formed in the stomach. Not surprisingly, people experience a slight feeling of satiety, although they have not actually eaten anything. There is no discomfort, so plain sparkling water is now recommended as a remedy for overeating. In addition, the consumption of drinking carbonated water improves the well-being of people suffering from dyspepsia and constipation. Carbonated mineral water strengthens the immune system, improves metabolism, removes toxins from the body, regulates the acid-base balance, normalizes the digestive system, treats gastritis with normal and high acidity, helps to cope with gastric and duodenal ulcers, treats cough, copes with bronchitis, increases the level of hemoglobin in the blood, removes harmful cholesterol, strengthens teeth and bones, improves the functioning of the thyroid gland, treats diseases of the liver and gallbladder, promotes the outflow of bile, tones, restores vitality, strengthens the nervous system.
The main part of the production and sale of carbonated water is carried out by enterprises of the Central Federal District (in 2019, they accounted for …% of total revenue). Enterprises of the Central Federal District show phenomenal growth - in 2015-2019. the average annual growth rate (CAGR) of revenue amounted to …%. The products of these enterprises are widely represented not only in the Central Federal District, they also actively supply consumers in the neighboring North-Western Federal District.
If in 2015 the market leader in terms of revenue was the North Caucasian Federal District with its famous Stavropol Kavminvody, sources in Karachay-Cherkessia and Dagestan, then in 2019 this macro-region moved to second place. In 2015-2019 the share of proceeds of enterprises of the North Caucasus Federal District decreased from … to …%. The products of the North Caucasian producers are also widely represented in the regions of the Southern Federal District (primarily in the Krasnodar Territory, Adygeya, Rostov and Volgograd Regions), where the production of carbonated water is relatively poorly developed.
Approximately …% in the structure of national revenue is occupied by plants of the Siberian and Volga federal districts.
The Far Eastern Federal District attracts attention, where the average annual growth rate (CAGR) of revenue in 2015-2019. exceeded …% (for five years, the share of this macro-region in the structure of national revenue increased from … to …%).
There are more than 540 retail outlets in India, and almost every one of them has carbonated mineral and drinking water in its assortment.
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1.3. Assessment of factors affecting the market
Let's consider the main factors influencing the market and, accordingly, demand.
social factors.
Until 2017, the resident population of India grew slowly, but since 2018, there has been a decrease in the number of Indians. India has extremely low rates of natural population growth, the positive dynamics was mainly formed by migration inflow. Due to the coronavirus, at least in 2020 and 2021. there will be a decrease in the number of migrants in India, which means that the country's consumer audience will continue to decline.
Table 1. Resident population of India, 2015-2019
An increasing number of people in India are concerned about a healthy diet, which involves the fight against overeating, drinking high quality water that improves human well-being. Carbonated mineral and drinking water positively contributes to this.
Economic forces.
Real disposable income of the population in 2015-2017 decreased, and in 2018-2019. showed a slight increase at the level of statistical error.
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In 2015-2019 per capita grocery retail turnover in India has been growing, but the nature of this growth is inflationary. In volume terms, food and beverage sales barely increased. This indicates a weak solvent demand from the population.
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There is a small consumer group (high-end restaurants, hotels, representative offices of large companies, etc.) that consistently buys foreign brands of sparkling water, but the increase in prices for these products has practically no effect on their demand.
For the above reasons, exchange rate fluctuations do not have a significant impact on the Indian soda market.
Technological factors.
The e-commerce segment in India is developing dynamically, but the progress so far has been modest. In 2019, e-commerce accounted for only 2% of retail turnover. During the coronovirus period in 2020, the share of online commerce in India rose to a record 10,9%. Perhaps consumers will like this shopping scheme, and they will continue to actively use the services of online stores after the end of the pandemic.
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High-quality carbonated water is a rather complex technological product. Let's illustrate this with the example of the production of BonAqua water by Coca-Cola. Artasian wells, from where water begins its journey, have a depth of 130 to 240 meters. Pumps transport water from underground to the tank of the water treatment department through a system of underground pipelines. Special boxes and ultrasonic repellent installations protect underground sources from strangers and animals.
In the tank, where the first stage of water purification takes place, flocculants are added to the water - substances that bind small impurities. As a result, floccules, large flocculent particles, appear. Filtering them is much easier than a suspension. The water then passes through 6 sand filters that remove floccules and excess iron (the iron content is reduced from an average of 1,3 to 0,3 mg/l). Salt is removed by reverse osmosis. The meaning of this technological operation lies in the fact that water under pressure is passed through three stages of semi-permeable membranes that allow water molecules to pass through, but retain larger salt particles. As a result, water is divided into two parts - concentrated and pure (permeate).
Salt concentrate is used for technical needs. And prepared water is added to the permeate, which has passed through sand filters, but was not in the reverse osmosis unit. Thus, the content of macro- and microelements is brought to high quality standards. Next, a carbon filter is used, which eliminates odors and residual impurities. And particles of activated carbon that could get in the previous stage are removed by a polishing filter (fine filter). Bottling is carried out in tanks with UV lamps, which prevent the growth of microorganisms.
Before being in the bottle, the water passes through the ultraviolet rays one more time (control operation). The next stage is the saturation of water with ozone, or ozonation. The gas turns into oxygen, which makes the water taste better. Ozone also kills all microorganisms in a matter of seconds, but at this stage the water is already crystal clear: double UV radiation carried out a comprehensive cleaning. To get a carbonated product, carbon dioxide is added to the water.
The laboratory takes an important part in the work: employees take water samples at each stage of production and check 240 parameters for compliance with quality standards. Control rechecking of water quality characteristics is also carried out in independent Indian and international laboratories.
Making plastic bottles is also part of the production process. They are blown out of preforms that look like test tubes. Machines wash the bottles with disinfected water and pour carbonated water into them. Bottles get labels and corks, then packed in a film.
The above technology justifies itself economically if carbonated water has a well-known brand and a loyal attitude on the part of consumers, national sales geography, contracts with leading national and regional retail chains. Many small regional producers cannot afford this (high-tech production, expensive branding, ATL- and BTL-marketing, investments in the sales shelf), so they work in the cheap and medium price segment in the regions adjacent to the plant.
political factors.
Bottled water is a food product of daily consumption for millions of Indians, therefore, the Rospotrebnadzor of India, the Rosprirodnadzor of India carry out strict and regular monitoring of the conditions for the extraction of groundwater, its production processing, storage, transportation, sale at wholesale, retail and public catering points.
In India, targeted state programs “Clean Water” are regularly adopted at the federal and regional levels, which are aimed at improving the access of the country's inhabitants to centralized water supply systems and improving the quality of drinking water. Where the quality of water in the central water supply improves, purchases of bottled water, including sparkling water, decrease.
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1.4. Life cycle stage of the carbonated water market
The market of carbonated mineral and drinking water in India is approaching the stage ... On the one hand, none of the consumers need to explain what carbonated mineral and drinking water is, its benefits for the body. The products are widely represented on the shelves of network and traditional retail outlets in all formats of outlets in various parts of the country. On the other hand, as real incomes rise, the population will be offered a wide choice of brands of better quality and more expensive carbonated water, produced at the level of the best world standards. This will require more active marketing communications between factories and consumers.
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1.5. Competition from substitute products
With a decrease in real incomes of the population, the consumption of carbonated water is reduced in favor of non-carbonated analogues in large packages (5 liters or more). Due to the use of a large-format packaging solution, in terms of 1 liter of the finished product, it turns out to be much cheaper to buy still water.
Table 6. Production structure of mineral and drinking carbonated and non-carbonated water, 2015-2019
Manufacturers of sugary carbonated drinks are under constant pressure from consumers, government oversight bodies, and the medical community, who daily point out the harm of drinking sweet carbonated drinks, especially in childhood (for example, in the US and EU countries, the sale of sweet carbonated drinks in schools is prohibited). In response, large manufacturers invest heavily in the development and marketing of improved versions of the same products, offering their consumers:
• carbonated drinks with a reduced amount of sugar or replacement of sugar with sweeteners,
• carbonated drinks with reduced calorie content and glycemic index,
• replacement of artificial dyes with natural ones, also natural juices are used as dyes,
• carbonated drinks in the form of water with added juice,
• carbonated drinks with original flavors (cherry Coca-Cola, etc.),
• Healthy lemonades (eg fresh citrus juice, cane sugar or honey sweetener, water).
According to the forecasts of Euromonitor specialists, from 2017 to 2022, the Indian market of sweet carbonated drinks will grow by …% in volume, drinks with Cola flavor will grow only by …%, while drinks with other flavors have a growth potential of …%.
Part 2. Competitive analysis in the sparkling water market
2.1. Major players in the market
The table shows the total revenue of companies in 2019, which includes both income from the production and sale of carbonated mineral and drinking water, as well as income from still water, sweetened drinks, soft drinks, etc.
Table 7. Main companies participating in the sparkling water market in 2019
2.2. Market shares of the largest competitors
The following shares of the largest competitors in the market are calculated taking into account the total revenue of enterprises and the share of the object of study in the total assortment of these companies, that is, from the revenue associated with the production and sale of carbonated mineral and drinking water.
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The market for carbonated mineral and drinking water belongs to ... type - the Herfindahl-Hirschman index (HHI) ... 1000.
2.3. Profiles of major players
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Part 3. Analysis of carbonated water production
3.1. Volume and dynamics of domestic production of carbonated water
In 2015-2019 Indian production of carbonated mineral and drinking water in physical terms grew at the average annual rate (CAGR) of …%. During the specified period of time, Indian factories increased their production volumes every year (year-on-year growth fluctuated in the range of … – …%).
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There are about ... factories in India that produce carbonated mineral and drinking water. The top five include transnational corporations Coca-Cola, PepsiCo, dynamically developing international group IDS Borjomi International, which invest large sums of money in strengthening their market positions: assortment development, numerical and weighted distribution, active brand and trade marketing.
Below is the combined revenue of the top five Indian sparkling water producers. This revenue includes the total revenues of these companies from the sale of the entire range of goods and services, and not just soda.
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3.2. Share of exports in the production of sparkling water
Exports have little effect on the business results of Indian producers of carbonated mineral and drinking water. In 2015-2019 the share of export in production decreased from … to …%.
Indian producers have not yet learned how to successfully create and sell international brands of expensive premium water, which is economically viable to transport even over long distances (2000-5000 km). Therefore, due to expensive logistics, the geography of Indian exports is limited to neighboring countries (the share of … in 2019 accounted for about …% of the value of exports). Both Indian brands themselves and trademarks of transnational companies with production facilities in India are supplied there.
Siberian and Far Eastern Indian plants really want to get into the huge Chinese market, but the cost of transportation is up to …% of the cost of water, so their price offer is the most expensive on the shelves of Chinese stores compared to Chinese competitors.
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3.3. Segmentation of carbonated water production by regions
3.3.1. Production by Union Territories of India
In 2015-2019 the compound annual growth rate (CAGR) of carbonated water production was 3,1%. The producers of the Central and Southern Federal Districts are noteworthy, demonstrating the highest growth rates.
Table 9. Dynamics of production volumes of carbonated water by union territories of India for 2015-2019
3.3.2. Production by states of India
The first five regions of India account for …% of Indian production of carbonated mineral and drinking water.
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Part 4. Analysis of foreign trade supplies of sparkling water
4.1. Volume and dynamics of sparkling water imports
In 2015-2019 average annual growth rates (CAGR) of imports of carbonated mineral and drinking water to India in physical terms amounted to …%. In 2019, India imported … thousand tons of carbonated water, which is almost … times more than in 2015 (… thousand tons).
In May 2013, India allowed the import of Georgian mineral and drinking water and very quickly ... took first place in the ranking of supplier countries. From 2015 to 2019 … increased the volume of water supplies to India by … times. Key … brands – ...
Significantly influenced the growth of import operations ... factories. January 01, 2015 ... joined the EAEU, which means that imports of ... products were no longer subject to customs duties (that is, the cost of the product decreased by ... and ...%, depending on the HS code). Since 2016, a strong devaluation of … against the Indian rupee began, which made export prices for … products more attractive. The Indian market has a wide range of ... brands of carbonated mineral and drinking water: ... etc.
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4.2. Structure of imports by countries
In 2019, almost ¾ of Indian imports of carbonated mineral and drinking water were provided by … producers (… tons worth … thousand $).
… delivered to India … tons worth … thousand $.
It should be noted that the fourth and sixth positions in the list of supplier countries were taken by …, respectively (in 2019, … accounted for …% of the cost of imports, … – …%). Their products are well known to affluent Indian consumers.
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4.3. Volume and dynamics of carbonated water exports
In 2015-2019 The record volume of exports was recorded in 2015, when Indian enterprises exported … thousand tons outside the country. In 2016-2017 there is a deep drop in export sales, and since 2018 the volume of sales begins to gradually recover. In 2019, the volume of exports in physical terms amounted to … thousand tons. The lion’s share of “lost” sales in 2019 (about … thousand tons) falls on ... During this period, political and economic relations between India and Ukraine worsened, Ukrainian consumers became less loyal to Indian brands.
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In monetary terms, export volumes in 2019 exceeded the record figures of 2015. In 2019, Indian factories shipped abroad carbonated mineral and drinking water in the amount of … thousand $. In 2015-2019 the average annual growth dynamics (CAGR) of exports in value terms amounted to only …%.
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4.4. Structure of exports by countries
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The volume of imports of carbonated mineral and drinking water consistently exceeded the volume of exports, so every year India developed a trade deficit. If in 2015 the size of the trade balance deficit reached … thousand tons, then by 2019 it increased to … thousand tons.
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During the indicated period of time, the export price in dollar terms was growing at the annual rate (CAGR) …%, while the price of imports was rapidly declining (CAGR amounted to …%).
The fall in household incomes and the devaluation of the Indian rupee, which led to a rise in the cost of imported sparkling water, forced Indian consumers to adjust demand in favor of cheaper products.
Table 13. Average import and export prices in the sparkling water market, 2015-2019
Part 5. Analysis of carbonated water consumption
5.1. Dynamics of consumption of carbonated water
In 2015-2019 average annual growth rates (CAGR) of carbonated mineral and drinking water consumption in monetary terms at current prices exceeded …%.
If we recalculate the dynamics of consumption through consumer prices in 2015 (the method of estimating consumption in constant prices, leveling the inflation factor), it will be found that in 2015-2019. average annual growth rate (CAGR) of consumption amounted to …%.
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5.2. Analysis of the results of tenders for the purchase
The amount of tender purchases in 2019-2020 exceeded … million Rs.
Carbonated water was purchased through tenders mainly as part of complex lots, including non-carbonated water, other drinks, and food products. Detailed information about the conducted tenders is presented in Appendix 1 to this marketing research.
Part 6. Price Analysis
6.1. Average Producer Prices by Union Territories of India
In 2015-2019 average annual growth rates (CAGR) of producer prices for carbonated mineral and drinking water amounted to only …%. (For comparison, consumer prices in wholesale and retail trade grew on average by …% annually.) It is obvious that trading companies, taking advantage of high competition in this product segment, limited price increases from factories, but at the same time did not forget to significantly increase their trade margin .
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Water quality and a well-known brand is a significant thing and a guaranteed premium to the price in the sparkling water market. A clear illustration is the Southern and North Caucasian federal districts, which are geographically close, but the North Caucasian level of producer prices is almost 2 times higher).
Table 14. Average Producer Prices in the Soda Market by Union Territories of India, 2015-2019
6.2. Average consumer prices by states in India
Despite the reduction in real incomes of the population, the weak dependence of the carbonated water market on the exchange rate and foreign economic conditions, consumer prices for carbonated mineral and drinking water are growing dynamically: in 2015-2019. average annual growth rates (CAGR) amounted to …%. In 2016 and 2019 price jumps exceeded … and …% respectively.
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In the table below, consumer prices are ranked in descending order in 2019. The highest price level can be observed mainly in the regions of the Far East, North-West and two metropolitan agglomerations.
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